Gen-Probe Inc. v. Becton, Dickinson & Co.

• Decision Date: 06 April 2012
• Docket Number: Civil No. 10cv0602 BEN (NLS),Civil No. 09cv2319 BEN (NLS)
• Parties: GEN-PROBE INCORPORATED, a Delaware corporation, Plaintiff, v. BECTON, DICKINSON AND COMPANY, a New Jersey corporation, Defendant. BECTON, DICKINSON AND COMPANY, a New Jersey corporation, Counterclaimant, v. GEN-PROBE INCORPORATED, a Delaware corporation, Counterdefendant.
• Court: U.S. District Court — Southern District of California

GEN-PROBE INCORPORATED, a Delaware corporation, Plaintiff,

v.BECTON, DICKINSON AND COMPANY, a New Jersey corporation, Defendant.

BECTON, DICKINSON AND COMPANY, a New Jersey corporation, Counterclaimant,

v.GEN-PROBE INCORPORATED, a Delaware corporation, Counterdefendant.

Civil No. 09cv2319 BEN (NLS)

Civil No. 10cv0602 BEN (NLS)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

Dated: April 6, 2012

ORDER RESOLVING JOINT MOTION

FOR DETERMINATION OF DISCOVERY DISPUTE NO. 15

[Doc. No. 254]

Plaintiff Gen-Probe Incorporated ("Gen-Probe") and Defendant Becton, Dickinson and Company ("BD") submitted a joint motion to resolve a discovery dispute as to whether the attorney-client privilege applies to communications between Gen-Probe's outside patent prosecution counsel and a third party, Mark Toukan. [Doc. No. 254.] The subject communications are identified in Gen-Probe's privilege logs of January 14, 2011 and December 19, 2011. For the following reasons, the court finds that the subject communications are protected by the attorney-client privilege.

I. Relevant Background

In 1996, Gen-Probe Inc. ("Gen-Probe") contracted with RELA, Inc. ("RELA") to help Gen-Probe develop an automated nucleic acid detection system. (Cappellari Decl. ¶ 2; Kling Decl. ¶ 1.) Gen-Probe required RELA to maintain the confidentiality of its work product, and to acquire all intellectual property rights from its employees and contractors and assign these rights to Gen-Probe. (Cappellari Decl. ¶¶ 2-3, Ex. A.) RELA hired Mark Toukan as an independent contractor to work on this project, ("Project Ginny"). (Kling Decl. ¶ 3; Cappellari Decl. ¶ 7, Exs. B-F.) While Mr. Toukan's contract with RELA cannot be found, RELA did not assign anyone to Project Ginny unless he or she first signed a standard form contractor agreement. (Kling Decl. ¶ 2.) This agreement provided, in pertinent part:

3. All properties resulting from this agreement, whether tangible or intellectual, including, but not limited to, trade secrets and inventions, copyrights, etc., whether or not patentable,

are hereby assigned to RELA. The contractor agrees to sign any documents, (e.g., patent applications) which RELA may deem necessary to transfer ownership of said property, regardless of whether or not this agreement has been terminated.

...

6. It is understood that under this agreement and while working for RELA, the contractor may be given access to, or knowledge of, confidential information and trade secrets of RELA, its divisions and its clients. Such information may include, but is not limited to, hardware, software, technology, patents, concepts, ideas, discoveries, marketing strategies, purchasing policies, pricing and terms. Regardless of whether this agreement is still in force or has been terminated, and except as required by contractor's assigned duties, the contractor WILL NEVER directly or indirectly use, sell, discuss, disclose, convey, disseminate, lecture or publish articles or data relating to confidential information pertaining to RELA, its divisions, or its clients.

(Smith Decl. ¶¶ 3-4; Kling Decl. ¶ 4.)

In 2002, one of Gen-Probe's outside patent attorneys, Richard Wydeven, contacted Mr. Toukan by email and phone regarding a patentability investigation he was conducting. (Wydeven Decl. ¶ 6.) None of their communications related to any of the Automation Patents asserted by Gen-Probe in this case.¹ (Wydeven Decl. ¶ 8.) Becton, Dickinson & Co. ("BD") seeks to discover the contents of the discussions between Mr. Wydeven and Mr. Toukan.

II. Relevant Legal Principles

The attorney-client privilege protects disclosure of communications between a client and his attorney. United States v. Zolin, 491 U.S. 554, 562 (1989); Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). Whether the attorney-client privilege applies should be determined on a case-by-case basis. See Upjohn Co., 449 U.S. at 396. The privilege "exists to protect not only the giving of professional advice to those who can act on it, but also the giving of information to the lawyer to enable him to give sound and informed advice." Id. at 390. "Because it impedes full and free discovery of the truth, the attorney-client privilege is strictly construed." Weil v. Inv./Indicators, Research & Mgmt., Inc. 647 F.2d 18, 24 (9th Cir. 1981). The party asserting attorney-client privilege has the burden of establishing all of the elements of the privilege. See United States v. Plache, 913 F.2d 1375, 1379 n.1 (9th Cir. 1990).

An eight-part test determines whether information is covered by the attorney-client privilege:

(1) When legal advice of any kind is sought (2) from a professional legal adviser in his or her capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are, at the client's instance, permanently protected (7) from disclosure by the client or by the legal advisor (8) unless the protection be waived.

United States v. Martin, 278 F.3d 988, 999-1000 (9th Cir. 2002).

When, as here, a corporation is a party, a corporation privilege may apply. See Upjohn Co., 449 U.S. 390-94. In Upjohn, the Supreme Court held that a corporation's privilege extends to communications between corporate employees and corporate counsel as long as the communications are "made at the direction of corporate superiors in order to secure legal advice." United States v. Chen, 99 F.3d 1495, 1502 (9th Cir. 1996) (citing Upjohn, 449 U.S. at 390-94). Additionally, "communications between employees of a subsidiary corporation and counsel for the parent corporation . . . would be privileged if the employee possesses information critical to the representation of the parent company and the communications concern matters within the scope of employment." Admiral Ins. Co. v. U.S. Dist. Court for Dist. Of Az., 881 F.2d 1486, 1493 n.6 (9th Cir. 1989).

In In re Bieter Co., 16 F.3d 929 (8th Cir. 1994), the Eighth Circuit extended privilege to communications between an independent contractor for a real estate partnership and the partnership's counsel. The contractor had interacted on a daily basis with the partnership's principals and was involvedin the transaction that gave rise to the suit. Id. at 938. The court held that "an independent consultant can be a representative of the client for the purpose of applying the attorney-client privilege." Id. at 936. The court considered it "inappropriate to distinguish between those on the client's payroll and those who are instead, and for whatever reason, employed as independent contractors." Id. at 937. The court feared that "too narrow a definition of 'representative of the client' will lead to attorneys not being able to confer confidentially with nonemployees who, due to their relationship to the client, possess just the very sort of information that the privilege envisions flowing most freely." Id. at 938. The court held that the attorney-client privilege applied to communications between counsel and the outside consultant because he was retained

'to provide advice and guidance regarding commercial and retail development based upon [his] knowledge of commercial and retail business in the State of Minnesota,' just as one would retain an outside accountant for her knowledge of, say, the proper accounting practices and taxation concerns of partnerships. There is no principled basis to distinguish [the Bieter consultant's] role from that of an employee, and his involvement in the subject of the litigation makes him precisely the sort of person with whom a lawyer would wish to confer confidentially[.]

Id. The Ninth Circuit followed the Eighth Circuit's cue by adopting Bieter's principles in United States v. Graf, 610 F.3d 1148, 1159 (9th Cir. 2010), holding an outside consultant's role in the company was that of a functional employee, thus implicating the corporate attorney-client privilege.

The corporation attorney-client principle applies to current and former corporate employees alike. Admiral Ins. Co., 881 F.2d at 1493. Indeed, "[f]ormer employees, as well as current employees, may possess the relevant information needed by corporate counsel to advise the client with respect to actual or potential difficulties." Id. (citation omitted).

III. Discussion

A. Was Mr. Toukan A Functional Equivalent Of A Gen-Probe Employee, Such That The Attorney-Client Privilege Attached To Conversations Between Him And Gen-Probe's Outside Counsel?

BD asserts that Gen-Probe "does not enjoy attorney-client privilege over communications with Mr. Toukan as a former employee or consultant," (Joint Mot. at 9) as Mr. Toukan's relationship with RELA, a third-party, "does not create an attorney-client relationship between Gen-Probe's outside attorney counsel and Mr. Toukan." Joint Mot. at 8 (emphasis in original). In response, Gen-Probe argues that because Mr. Toukan was the functional equivalent of an employee of RELA, "he is treatedlike an employee (or former employee) for privilege purposes." Joint Mot. at 16 n.15. After reviewing the applicable law, the court finds that the privilege should extend to cover communications with Mr. Toukan, as he was a functional employee of RELA, and there is no principled basis to treat him differently than true RELA employees who clearly fall within the confines of the attorney-client privilege.

Gen-Probe contracted with RELA in 1996 to help develop an automated nucleic acid detection system. (Cappellari Decl. ¶ 2; Kling Decl. ¶ 1.) Under Bieter and Graf, the attorney-client privilege extends to communications between independent contractors (here, RELA employees), and the corporation's (Gen-Probe) counsel. Thus, qualifying communications with true RELA employees working on Project Ginny would be covered by the attorney-client privilege.

RELA hired Mr. Toukan as an independent contractor to work on Project Ginny. Gen-Probe submitted evidence demonstrating that in signing a contract with RELA, Mr. Toukan submitted himself to a confidentiality provision that...